Gabino Diaz - Page 6

          in the litigation.  Coastal Petroleum Refiners, Inc. v.                     
          Commissioner, 94 T.C. 685, 688-690 (1990).                                  
               Respondent’s position in a judicial proceeding is that which           
          is set forth in respondent’s answer to the petition.  Sec.                  
          7430(c)(7)(A); see Huffman v. Commissioner, 978 F.2d 1139, 1147-            
          1148 (9th Cir. 1992), affg. in part and revg. in part T.C. Memo.            
          1991-144; Maggie Mgmt. Co. v. Commissioner, supra at 442.                   
               Respondent concedes that petitioner substantially prevailed            
          with respect to the amount in controversy and exhausted all                 
          administrative remedies.  Respondent argues, however, that                  
          respondent’s position was substantially justified and that                  
          therefore petitioner does not qualify as a prevailing party for             
          purposes of section 7430.                                                   
               Relying on an unpublished opinion, McKee v. Commissioner,              
          209 Fed. Appx. 691 (9th Cir. 2006) (holding that respondent’s               
          position was not substantially justified where respondent                   
          admitted that key errors were made in calculating the taxpayer’s            
          deficiency), revg. T.C. Memo. 2004-115, petitioner argues that              
          respondent’s position was not substantially justified.                      
               We conclude that on the record before us respondent was                
          substantially justified in asserting in his answer that                     
          petitioner’s claimed deductions were not substantiated.  A number           
          of individuals in addition to petitioner were referenced on                 
          checks and other documentation that were provided to respondent.            

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